Good Example Of Essay On Raising Minimum Wage And Increasing Profits

Type of paper: Essay

Topic: Workplace, Wage, Minimum, Increase, Human Resource Management, Customers, Business, Company

Pages: 2

Words: 550

Published: 2021/01/07

One of the most common statements regarding the minimum wage is the claim that if minimum wage were to be increased, prices would go up accordingly, and there would be no overall change in the economy. Commonly, this is stated in terms of fast food: if workers were paid $15 per hour, opponents of raising the minimum wage claim, then a hamburger would undoubtedly cost more than $10, negating the overall effect of raising the minimum wage. The claim is simple: if businesses “lose” money by paying their workers more, they must recoup those losses by shifting the loss to the customer. However, this understanding reflects a simplified understanding of economics and of the effect of small changes on a multinational conglomerate.
The first and most important fact to note insofar as the minimum wage is concerned is that there is actually no evidence that companies experience a deterrent effect in the hiring process when minimum wage is increased (Albert, 2013). As Figure 1 shows, there is actually an increase in low-wage sectors when the minimum wage is increased—the fact is that companies need individuals who are working in low-wage jobs, and when low-wage workers can make a living salary, it is more efficient and effective for the business because their workers are happier and more willing to work (Albert, 2013). Albert (2013) notes that there is a deterrent effect on companies’ willingness to hire adolescents for low-wage jobs, but this reflects a higher turnover rate in adolescent workers, and unwillingness on a company’s part to invest in a worker who will not stay for a long period of time (Albert, 2013). Adolescents may be victims of a higher minimum wage, but often, adolescents are not the intended recipients of the minimum wage hikes—instead, long-term workers who are trying to earn a living on minimum wage are the intended recipients of these hikes, and minimum wage hikes help grow the sector (Albert, 2013).
Increasing the minimum wage is also a good idea because it will increase consumer spending power. Most small business owners understand that any increase in minimum wage that they give their employees will go back into the market—if the minimum wage was suddenly increased 50%, the entirety of that 50% would not go into savings. Most of that money would be put back into the market, and that market boost is something that small businesses recognize as important (Heymann & Barrera, 2010). Without this increase in consumer spending power, the market can and will stagnate—this is something that the United States has seen in recent years, because the recession has caused a decrease in consumer spending (, 2015). The Unite States Department of Labor (2015) writes, “In California, employers are required to pay servers the full minimum wage of $9 per hour - before tips. Even with a recent increase in the minimum wage, the National Restaurant Association projects California restaurant sales will outpace the U.S. average in 2014 Employers in San Francisco must pay tipped workers the full minimum wage of $10.74 per hour – before tips. Yet, the San Francisco restaurant industry has experienced positive job growth over the past few years according to the Bureau of Labor Statistics” (, 2015). In short, the ability of a worker to make a decent living doing their job is fundamental to the success of a business—and when businesses invest in the overall financial success of their workers, the economy becomes much more successful as well (, 2015). When workers are off work, they are consumers, and increasing their spending power is something that companies should be invested in.
One way to offset the costs of raising the minimum wage is, indeed, raising prices for the consumer. This is not the only way to offset the increase of the minimum wage, however; indeed, there are a number of different ways that a company can offset the loss that they do accrue (however small that loss may be) as a result of an increase in the minimum wage for workers (Pathe, 2015). Pathe (2015) suggests, “The revenue used to offset higher wages would come from an expected 2.5 percent increase in sales per year (based on past economic growth trends). With steady revenue increases, companies can redistribute more revenue toward payrolls without lowering their average profit rate” (Pathe, 2015). In short, companies can increase prices, but they can also rely on the redistribution of revenue throughout the company to ensure that the problems of compensation for the increase in the minimum wage are met. Because the overall increase in cost would be so small—Pathe (2015) suggests that a wage hike to $10.10 per hour would be only 3.3% of annual industry sales—it could be distributed to the consumer with minimal change in purchase price (Pathe, 2015). Many people are unwilling to accept an increase in cost, no matter how small it may be, however; in the case of public outrage, companies may choose to rearrange their revenue streams to cover the increase in cost so that the cost is not passed on to the consumer (Pathe, 2015).
The final reason why an increase in minimum wage would be good for profits is not as much an economic reason as it is a psychological reason. Economics and psychology are intricately intertwined, of course, and people have fascinating psychological reasons for acting in the ways that they act at any given point. However, in terms of economics, the fact remains that workers who are paid better are just happier, and they are more willing to work hard for the company (Ruetschlin, 2012). When workers are happy, they have loyalty to their employer; they are willing to go above and beyond their average daily workload to ensure that the customers are happy, and happy customers are also more likely to frequent stores and businesses where they feel valued. This is, again, not a purely economic reason for the success of the minimum wage; however, it is important to bear in mind that when a worker is stressed or unhappy—worries about money are incredibly stressful—he or she is often unable to do his or her job to the best of his or her ability. When this individual is in a customer-facing position, this can be detrimental to the business’ relationship with its customers (Ruetschlin, 2012). In short, raising the minimum wage would keep employees happy and willing to work hard; it would also keep customers happy and increase customer loyalty to certain businesses or organizations.


Albert, J. (2013). Four reasons why a higher minimum wage for the US is a good idea. [online] Quartz. Available at: [Accessed 31 Mar. 2015]., (2015). Minimum Wage Mythbusters - U.S. Department of Labor. [online] Available at: [Accessed 31 Mar. 2015].
Heymann, J. and Barrera, M. (2010). How businesses can profit from raising compensation at the bottom | Ivey Business Journal. [online] Available at: [Accessed 31 Mar. 2015].
Pathe, S. (2015). How to raise the minimum wage 107 percent without losing jobs or profit. [online] PBS NewsHour. Available at: [Accessed 31 Mar. 2015].
Ruetschlin, C. (2012). Retail's Hidden Potential: How Raising Wages Would Benefit Workers, the Industry and the Overall Economy | Demos. [online] Available at: [Accessed 31 Mar. 2015].

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Good Example Of Essay On Raising Minimum Wage And Increasing Profits. Free Essay Examples - Published Jan 07, 2021. Accessed May 29, 2023.

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